ASC 720-15-25-1 states that "Costs of start-up activities, including organization costs, shall be expensed as incurred." Start-up activities include, among other things, those one-time activities related to conducting business in a new territory. So I think that the GAAP position regarding one-time legal and other costs to do business in an additional state is pretty clear: expense as incurred.

Anonymous

(Agent, JKS Solutions, Inc.)
| Dec 30, 2014

No you may not capitalize an operating cost that will be renewed annually. The life of a capital asset must be in excess of one year. Going into a new jurisdiction involves registering and filing with various authorities for licensing and taxation and environmental regulation, but these costs will occur annually, these are operating expenses.

If you are working with stock issues and share base payment arrangements such as Private Offerings, you are able to push the legal costs associated with those things to Equity directly rather than expense. But I don't think you are asking about this.

I understand that state licensing costs that we renew annually are expensed, which we do. The 'licensing costs' I'm referring to and are wondering if they can be capitalized, are the one time costs. For example, legal fees and marketing fees. Can these costs be capitalized?

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